541. Foreign gold and silver coins, at the rates established by

the Custom Houses and commercial usage.*

*

weight and purity.

Note.—The true method of estimating the value of foreign coins, is by their

EXCHANGE.

542. EXCHANGE, in commerce, signifies the receiving or paying of money in one place, for an equal sum in another, by draft or bill of Exchange.

OBS. 1. A Bill of Exchange is a written order, addressed to a person, directing him to pay at a specified time, a certain sum of money to another person, or to his order.

2. The person who signs the bill is called the drawer or maker; the person in whose favor it is drawn, the buyer or remitter; the person on whom it is drawn, the drawee, and after he has accepted it, the accepter; the person to whom the money is directed to be paid, the payee; and the person who has legal possession of it, the holder.

3. On the reception of a bill of exchange, it should be immediately presented to the drawee for his acceptance.

543. The acceptance of a bill or draft is a promise to pay it at maturity or the specified time. The common method of accept

QUEST-542. What is meant by exchange? Obs. What is a bill of exchange? Whɔ is the drawer of a bill? The drawee? The payee? The holder? 543. What is meant by the acceptance of a bill? What is the common method of accepting a bill?

* See Manual of Gold and Silver Coins by Eckfeldt & Du Bois; Ogden on the Tariff of 1846; Taylor's Gold and Silver Coin Examiner.

ing a bill, is for the drawee to write his name under the word accepted, across the bill, either on its face or back. The drawee is not responsible for its payment, until he has accepted it.

OBS. 1. If the payce wishes to sell or transfer a bill of exchange, it is necessary for him to endorse it, or write his name on the back of it.

2. If the endorser directs the bill to be paid to a particular person, it is called a special endorsement, and the person named, is called the endorsee, If the endorser simply writes his name upon the back of the bill, the endorsenent is said to be blank. When the endorsement is blank, or when a bill is drawn payable to the bearer, it may be transferred from one to another at pleasure, and the drawee is bound to pay it to the holder at maturity. If the drawee or accepter of a bill fail to pay it, the endorsers are responsible for it.

544. When acceptance or payment of a bill is refused, the holder should duly notify the endorsers and drawer of the fact by a legal protest, otherwise they will not be responsible for its payment.

OBS. 1. A protest is a formal declaration in writing, made by a civil officer termed a notary public, at the request of the holder of a bill, for its non-acceptance, or non-payment.

2. When a bill is returned protested for non-acceptance, the drawer must pay it immediately, though the specified time has not arrived, otherwise he is liable to prosecution.

3. The time specified for the payment of a bill is a matter of agreement between the parties at the time it is negotiated. Some are payable at sight; others in a certain number of days or months after sight, or after date. When payable after sight or date, the day on which they are presented is not reckoned. When the time is expressed in months, they are always understood to mean calendar months. Hence, if a bill payable in one month is dated the 25th of January, it will be due on the 25th of February. And if it is dated he 28th, 29th, 30th, or 31st of January, it will be due on the last day of February. It is customary to allow three days grace on bills of exchange.

545. Bills of exchange are usually divided into inland and foreign bills. When the drawer and drawee both reside in the same country, they are termed inland bills or drafts; when they reside in different countries, foreign bills.

ORS. In negotiating foreign bills, it is customary to draw three of the same date and amount, which are called the First, Second and Third of Exchange; and collectively, a Set of Exchange. These are sent by different ships of

QUEST.-514. When the acceptance or payment of a bill is refused, what should be done? Obs. What is a protest? 545. How are bills of exchange divided? Obs. What is meant by a set of exchange ?

conveyances, and when the first that arrives, is accepted or paid, the oiners become void. The object of this arrangement is to avoid delays, which might arise from accidents, miscarriage, &c.

FORM OF A FOREIGN BILL OF EXCHANGE.

Exchange £1039.

BOSTON, Oct. 3d, 1847.

At ninety days sight of this first of Exchange, (the second and third of the same date and tenor unpaid,) pay George Lewis, Esq., or order, One Thousand Pounds sterling, with or without farther advice.

Thirty days after sight, pay to the order of Messrs. Newman & Co., Twenty-five Hundred Dollars, value received, and charge the same to MACY & WOODBURY.

To Messrs. D. BAKER & Co.
Merchants, New Orleans.

546. The term par of exchange, denotes the standard by which the comparative worth of the money of different countries is estimated. It is either intrinsic or commercial.

The intrinsic par is the real value of the money of different countries, determined by the weight and purity of their coin.

The commercial par is a nominal value, fixed by law or commercial usage, by which the worth of the money of different countries is estimated.

OBS. 1. The intrinsic par remains the same, so long as the standard coins of each country are of the same metals, and of the same weight and purity; but in case the standard coins are of different metals, the intrinsic par must vary, as the comparative values of the metals vary.

2. The commercial par is conventional, and may at any time be changed by law or custom.

547. By the term course of exchange is meant the current price which is paid in one place for bills of a given amount drawn on another place.

Obs. 1. The course of exchange is seldom stationary or at par. It variez QUEST.-548. What is meant by par of exchange? Intrinsic par? Commercial par?

according to the circumstances of trade. When the balance of trade is against a country, that is when the exports are less than the imports, bills on the foreign country will be above par, for the reason that there will be a greater demand for them to pay the balance due abroad. On the other hand, when the balance of trade is in favor of a country, foreign bills will be below par, for the reason that fewer will be required.

2. It should be remarked that the course of exchange can never exceed very much the intrinsic par value; for it is plain that coin or bullion instead of bills will be remitted, whenever the course of exchange is such that the expense of insuring and transporting it from the debtor to the creditor country, is less than the premium for bills, and the exchange will soon sink to par.

548. Rates of exchange on Great Britain are commonly reckoned at a certain per cent., on the old commercial par, instead of the new par.

OBS. 1. According to the old par, the value of a pound sterling is $4.444, as fixed by act of Congress. in 1799. According to the new par it is $4.84. The intrinsic value of a £ ster., or sovereign, according to assays at the U. S. mint, is $4.861. The new par is the value fixed by the government in 1842, and is used in calculating duties, when the invoice is in sterling money.

2. The old par is nine per cent. less than the new par or legal value; consequently the rate of exchange must reach the nominal premium of 9 per cent. before it is at par according to the new standard.

Table of Exchange showing the value of £1 Sterling from 1 to to 12 per cent. premium on the old par of $4.444.

Old Par $4.444 52 per ct. $4.689 8 per ct. $4.800 94 per ct. $4.878

1 per ct.

4.4896

Note.-1. When exchange is 10 per cent. advance or over, on the old par, it will cause a shipment of specie to England; for the freight, interest and insurance will not amount to so much as the premium. When the premium is less than 9 per cent. English funds are, in reality, below their intrinsic par.

2. The practice of quoting rates of exchange at the old par, is calculated to lead persons unacquainted with the subject into serious mercantile mistakes, and to degrade our national currency by making it appear to foreign nations to be so much below par.

Ex. 1. A merchant negotiated a bill of exchange on London for £500, 10s., at 8 per cent. premium on the old par: how much did he pay for the bill?

Solution.-£500, 10s. £500.5. (Art. 346.)

Now $4.444X500.5=$2224.444 at the old par value. Then $2224.444× .08 177.955 the premium.

Or, the val. of £1 by table, $4.80×500.5=$2402.40. Ans.

2. A merchant negotiated a bill on Liverpool for £1000, at 1 per cent. discount from the new par: what did he pay for it? 3. What will a bill cost, on England, for £5265, 13s. 6d., at 8 per cent. advance on the old par ?

4. How much is a bill worth on France for 1500 francs, at 2 per cent. above par, which is $.186 per franc ?

5. What will a bill cost on Paris for 56245 francs, exchange being 5 francs and 54 centimes to the dollar?

6. What cost a bill of exchange on Hamburg for 2000 marcs banco, at 1 per cent. above par, which is 35 cts. per marc?

7. What cost a bill of exchange on St. Petersburg for 2560 roubles, at 2 per cent. discount, the par being 75 cts. per rouble? 8. What cost an inland bill of exchange at Boston, on New Orleans, for $15265.85, at 1 per cent. advance?

9. What cost a draft at Albany, on Mobile, for $20260, at 2 per cent. premium?

10. What cost a draft at St. Louis, on New York, for $35678, at 24 per cent. premium?

ARBITRATION OF EXCHANGE.

549. Arbitration of Exchange is the method of finding the exchange between two countries through the medium of that of other countries.

OBS. 1. When there is but one intervening country, the operation is termed simple arbitration, when more than one, it is termed compound arbitration.

2. Problems in Arbitration of exchange are usually solved by conjoined proportion. (Art. 511.) Care must be taken to reduce all the quantities which are of the same kind, to the same denomination.